ADVA Optical Networking Reports Q3 2014 Financial Results In Line with Guidance

Q3 2014 revenues at EUR 87.1 million

Q3 2014 IFRS pro forma operating income of
EUR 3.5 million (4.0% of revenues)

Q4 2014 revenues expected to range
between EUR 83 million and EUR 88 million with
IFRS pro forma operating income between 2% and 6% of revenues

MARTINSRIED/MUNICH, Germany, Oct. 22, 2014 (GLOBE NEWSWIRE) -- ADVA Optical Networking (FSE: ADV) announced Q3 2014 financial results for the quarter ended on September 30, 2014, and prepared in accordance with International Financial Reporting Standards (IFRS).

Q3 2014 IFRS FINANCIAL RESULTS

Revenues totaled EUR 87.1 million in Q3 2014 and were slightly above guidance of between EUR 82 million and EUR 87 million. This is up 10.2% vs. Q3 2013 at EUR 79.1 million and sequentially flat vs. EUR 87.2 million in Q2 2014. IFRS pro forma operating income, excluding stock-based compensation and amortization & impairment of goodwill & acquisition-related intangible assets, amounted to EUR 3.5 million or 4.0% of revenues in Q3 2014, at the upper end of guidance of between 0% and 4% of revenues. This compares to EUR 4.0 million or 5.0% of revenues in Q3 2013 and EUR 0.4 million or 0.5% of revenues in Q2 2014. The quarter-on-quarter increase of pro forma operating income is largely due to higher gross margins and lower operational expenses, while the year-on-year decrease is mainly due to slightly lower gross margins.

The IFRS operating income amounted to EUR 3.1 million in Q3 2014, after EUR 3.5 million in Q3 2013 and nil in Q2 2014. The key driver for the slightly lower year-on-year development is the above-mentioned decrease of pro forma operating income, while the favorable quarter-on-quarter development is largely due to the increase in pro forma operating income.

The IFRS net income amounted to EUR 4.4 million in Q3 2014, significantly up from EUR 2.3 million in Q3 2013. This increase was largely driven by an income tax benefit of EUR 1.0 million after income tax expenses of EUR 0.8 million in Q3 2013. Net foreign currency exchange gains of EUR 0.6 million in Q3 2014, after losses of EUR 0.1 million in Q3 2013, contributed to the positive development. Basic and diluted IFRS net earnings per share in Q3 2014 were EUR 0.09 after EUR 0.05 each in Q3 2013.

"We are pleased with the development of our Q3 2014 revenues of EUR 87.1 million, near the record level seen in the previous quarter, and slightly above guidance. The year-on-year increase of 10.2% is based on stronger enterprise business requiring more and improved high-speed transport networks. This is largely due to continued network traffic growth as a result of the increased adoption of cloud based services. Pro forma operating margin came in at 4.0%, at the upper end of guidance. This is largely driven by stronger gross margins and a tight management of operational costs. Our pro forma gross margin strengthened from 32.8% in Q2 2014 to 35.3% in Q3 2014. Prior to amortization of capitalized development projects, pro forma gross margin increased from 38.9% in Q2 2014 to 42.1% in Q3 2014. Furthermore, cash and cash equivalents were at EUR 82.6 million at the end of Q3 2014, up 4% from EUR 79.1 million at the end of the previous quarter and up 2% from EUR 80.6 million at the end of Q3 2013. Correspondingly, net liquidity increased to EUR 46.1 million at the end of Q3 2014, up 14% vs. the end of the previous quarter and up 11% vs. the end of Q3 2013. Cash and net liquidity levels at the end of Q3 2014 both reached quarter-end all-time highs, demonstrating our commitment to managing cash and strengthening our balance sheet," commented Jaswir Singh, chief financial officer & chief operating officer of ADVA Optical Networking.

CONFERENCE CALL

In conjunction with the release of its Q3 2014 financial results on October 23, 2014, ADVA Optical Networking will host a conference call for analysts and investors at 3:00 p.m. CEST / 9:00 a.m. EDT. Participating in the call will be ADVA Optical Networking's chief executive officer, Brian Protiva, and chief financial officer & chief operating officer, Jaswir Singh. Interested parties may dial in at +49 69 201744 210 or +1 877 423 0830, pin code 260 391#, and download the corresponding presentation from ADVA Optical Networking's website, located on the "financial results" page under "conference calls" in the investor relations section of ADVA Optical Networking's website at www.advaoptical.com.

Q4 2014 OUTLOOK

In Q4 2014, ADVA Optical Networking expects revenues to range between EUR 83 million and EUR 88 million, and anticipates a pro forma operating income of between 2% and 6% of revenues. As a matter of caution, ADVA Optical Networking notes that it will continue to perform quarterly reviews of the expected business development with respect to all intangible assets, including capitalized development expenses. In case of highly adverse business prospects, these reviews may result in non-cash impairment charges in Q4 2014 and beyond. The pro forma operating income guidance provided above excludes any such potential impairment charges. ADVA Optical Networking will publish its Q4 and full-year 2014 financial results on February 26, 2015.

"While our main markets - global Ethernet Access Devices and WDM in Europe - continue to show a sluggish growth trend, ADVA Optical Networking was able to gain market share. Many Service providers are still hesitant about making network decisions due to economic uncertainty and technology evolutions but the next investment cycle, based on open optical platforms and programmable packet access, is imminent. In fact, we are at the beginning of an industry transformation that will increase the value of transmission networks and service delivery technology: Virtualization and programmability have grown beyond the data centers and have started to embrace the networks that connect them. We were the first networking company to bring Software-Defined Networking (SDN) into the optical domain with our ADVA Network Hypervisor and the first to underline the potential a virtualized and dynamic optical layer, managed as an integrated switch, will have on the cloud. This month at the SDN World Congress, we again showcased our ADVA Network Hypervisor, a critical component in the development of service-centric networks. While we remain committed to introducing innovation that adds value to our customers' networks, we continue to optimize our costs, add flexibility to our operations capacity and invest appropriately in revenue-generating activities. These are the key ingredients for sustainable growth. Differentiating ourselves with innovation in an environment that relies ever more on networking technology will create further value for shareholders," stated Brian Protiva, chief executive officer of ADVA Optical Networking.

NINE-MONTH IFRS CONSOLIDATED INCOME STATEMENT

(in thousands of EUR,
except earnings per share)
Q3
2014
Q3
2013
9M
2014
9M
2013
Revenues 87,131 79,064 252,419 234,465
Pro forma cost of goods sold -56,332 -47,985 -165,412 -142,322
Pro forma gross profit 30,799 31,079 87,007 92,143
Pro forma selling and marketing expenses -11,994 -11,531 -35,097 -35,823
Pro forma
general and administrative expenses
-7,247 -5,958 -20,334 -19,505
Pro forma
research and development expenses
-16,619 -15,868 -50,265 -49,472
Income from capitalization
of development expenses
7,914 5,959 19,150 17,540
Other operating income and expenses, net 661 294 3,869 1,433
Pro forma operating income 3,514 3,975 4,330 6,316
Amortization of intangible assets
from acquisitions
-187 -171 -545 -512
Stock compensation expenses -239 -275 -574 -740
Operating income 3,088 3,529 3,211 5,064
Interest income and expenses, net -311 -427 -960 -841
Other financial gains and losses, net 621 -75 972 -1,010
Income before tax 3,398 3,027 3,223 3,213
Income tax benefit (expense), net 1,043 -771 824 -73
Net income 4,441 2,256 4,047 3,140
Earnings per share in EUR
Basic 0.09 0.05 0.08 0.07
Diluted 0.09 0.05 0.08 0.06

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About ADVA Optical Networking

ADVA Optical Networking is a global provider of intelligent telecommunications infrastructure solutions. With software-automated Optical+Ethernet transmission technology, the Company builds the foundation for high-speed, next-generation networks. The Company's FSP product family adds scalability and intelligence to customers' networks while removing complexity and cost. With a flexible and fast-moving organization, ADVA Optical Networking forges close partnerships with its customers to meet the growing demand for data, storage, voice and video services. Thanks to reliable performance for two decades, the Company has become a trusted partner for more than 250 carriers and 10,000 enterprises across the globe. For more information, please visit us at www.advaoptical.com.

The economic projections and forward-looking statements contained in this document relate to future facts. Such projections and forward-looking statements are subject to risks which cannot be foreseen and which are beyond the control of ADVA Optical Networking. ADVA Optical Networking is therefore not in a position to make any representation as to the accuracy of economic projections and forward-looking statements or their impact on the financial situation of ADVA Optical Networking or the market in the shares of ADVA Optical Networking.

ADVA Optical Networking provides consolidated pro forma financial results in this press release solely as supplemental financial information to help investors and the financial community make meaningful comparisons of ADVA Optical Networking's operating results from one financial period to another. ADVA Optical Networking believes that these pro forma consolidated financial results are helpful because they exclude non-cash charges related to the stock option programs and amortization and impairment of goodwill and acquisition-related intangible assets, which are not reflective of the Company's operating results for the period presented. This pro forma information is not prepared in accordance with IFRS and should not be considered a substitute for historical information presented in accordance with IFRS.

Published By:
ADVA Optical Networking SE, Martinsried/Munich and Meiningen, Germany
www.advaoptical.com

For Press:
Gareth Spence
t +44 1904 699 358
public-relations(at)advaoptical.com

For Investors:
Karin Tovar
t +1 201 940 7212
investor-relations(at)advaoptical.com

HUG#1864938

Source:ADVA Optical Networking SE